Card, Angrist, and Imbens won the 2021 Nobel Prize for Economics

qz.com
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fairly difficult
The three Americans, who shared the 2021 Nobel Prize for Economics, have looked for unintended experiments, and analyzed how they can help shape economic policy.
In economics, experimentation is an elusive affair. In examining whether a school education improves the mental health of children, for example, no economist can design and run a controlled experiment. As Eva Mörk, a member of the committee that judged the 2021 Economics Nobel, said during the prize announcement on Monday (Oct. 11): "We can't let some individuals take part in school and forbid others from going to school."

But sometimes the world offers experiments with readymade controls, if only economists know where to look.

Mörk provided one example. Children born on Dec. 31 of one year aren't appreciably older than those born the next day, but the former may start school a year earlier than the latter in countries where such decisions depend on the calendar year of your birth. To investigate how the school closures during the pandemic affected children, Mörk said, an economist might study a group of children who were born on Jan. 1 and who started school last year, and compare them with a control group of children who were born on Dec. 31 and started school in 2019. Set up in this way, the study shrinks the variations that might otherwise crop up while comparing older children to younger ones. In the pandemic, Mörk said, "nature has given us an experiment."

David Card, Joshua Angrist, and Guido Imbens, the three American economists who won the 2021 Nobel prize, have spent years looking for such experiments, analyzing the data from them, and drawing conclusions that can shape social policy in powerful ways.

Natural experiments in economics

In 1994, Card, an economist now at the University of California Berkeley but then at Princeton, found an unintended experiment, the results of which contested a commonly held belief in economic theory. Raising the minimum wage, many economists have argued, results in decreased levels of employment. Employers, having to pay their staff more, economize by hiring fewer people, the belief holds. In this model, the higher…
Samanth Subramanian
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